"[C]onsider two
indistinguishable workers, you and your clone. By definition, you/clone have the same gender, ethnicity, years of schooling, family
background, skills, etc. In 2006 you/clone graduated with identical
academic records from the same university and obtained identical
job offers from Facebook and MySpace. Not knowing any more
about the future than the analysts who valued Facebook and
MySpace roughly equally in the mid-2000s, you/clone flipped coins
to decide which offer to accept: heads – Facebook; tails – MySpace.
Clone’s coin came up heads. Yours came up tails.
Ten years later, Clone is in the catbird’s seat in the job market
— high pay, stock options, a secure future. You struggle. Back to
university? Send job search letters to close friends? Ask distant
acquaintances to help? The you/clone thought experiment may seem
extreme, but recent research that I have conducted with colleagues finds that the earnings of workers with near-clone similarity in
attributes diverged so much by the place they worked that rising
inequality in pay among employers has become the major factor in
the trend rise in inequality. ... The labor market has been dominated by
economic forces that pull the wages of firms further apart from each
other, motivating our analysis of the role of employers in increasing
inequality."

In other words, a lot of inequality is about where you work. The rise in equality is linked to differences across what firms are paying employees who appear to be similarly qualified. As Freeman acknowledges, this argument that this is a quantitatively important cause of rising inequality isn't ironclad at this point, but it's highly suggested in several ways of looking at the data: Freeman writes:

"This implies that 86% ... of the
trend increase in inequality [from 1977-2009] occurs among people with measurably
the same skills, whereas just 14% of the trend increase comes from
changes in earnings among workers with different skills.
The big surprise in the exhibit is that the inequality of average
earnings among establishments increased by the same 0.147 points [measuring variance of natural log of earnings, a standard measure of inequality of earnings] as did inequality among workers with the same characteristics. This
suggests that all of the increase in inequality among similar workers
comes from the increase in earnings at their workplaces."

Or here is a figure suggesting a linkage from firm earnings to individual inequality of earnings. The blue line shows the change in individual earnings along the income distribution from 1992-2007. As one would expect, given the rise in inequality, those in the bottom percentiles of the income distribution do worse, while those in the top percentiles of the income distribution do better. But now, notice that the blue line for individual earnings almost matches the orange line for firm earnings. That is, there has also been widening inequality in firm earnings, with those at the bottom of the earnings distribution also seeing a decline from 1992-2007 and those at the top seeing an increase. Freeman also offers evidence that those who stayed at firms have seen their earnings change with the fortunes of the firm--thus contributing to overall inequality. As he writes; "In sum, changes in the distribution of earnings among establishments affect the change in earnings along the entire earnings distribution and the increased advantage of top earners compared to other workers."

What makes it possible for successful firms to pay workers more? The answer must be rooted in higher productivity for those firms. Indeed, productivity seems to be diverging across firms, too.

Indeed, as Freeman emphasizes, this figure shows that the equality of revenue per worker--a rough measure of productivity at the firm level--is diverging faster than inequality of wages across firms. Moreover, Freeman argues that a similar pattern of productivity divergence across firms is happening within each sector of the economy.

Thinking about inequality between similar workers may alter how one thinks about public policies related to underlying determinants of inequality. For example, it may be important to think about how productivity gains diffuse across industries and how that process may have changed. I suspect there is also some element of geographical separation here, where firms in certain areas are seeing faster productivity and wage increases, and so thinking about mobility of people and firms across geographic areas may be important, too.